Defence Economy of Türkiye and The Global Position of The Türkish Defence Industry

Turkish defence industry plays a strategic role in the economic development of Türkiye

The defence industry makes significant contributions to economic mobility, as well as the creation of sustainable economic growth. The requirement of a highly skilled workforce for the production of military technology and equipment leads to the creation of high-value added business areas, in particular, engineering and R&D activities. The said workforce established creates a talent diffusion pool that may also offer advantages for other industries in the country.

New technological developments in the defence industry make a significant contribution to the development of related sectors such as aerospace, transportation, and health. The defence industry also encourages expansion in related sectors such as logistics and transportation and assists the regional economies to develop through the purchase of goods and services. Companies operating in the defence industry are significant consumers of products and services, and the main and sub-contracts given by the industry offer job opportunities for many small and medium-sized companies. The future of the defence industry is closely tied to maintaining competitiveness in products and services in a globally competitive environment. This renders R&D activities an essential part of the defence industry. Thus, the defence industry assumes the position of a clustering and diffusion centre for technological progress. The abotioned investment in R&D is helping the industry in developing cutting-edge technologies as well as fostering innovation in other sectors of the economy.

This way, R&D investments contribute to the creation of a sectoral network effect.The share given to the defence budgets of the countries and the military equipment and gear expenditures in the budgets make up the most basic elements shaping the global defence economy. However, all kinds of developments in the global economy and in particular, geopolitical developments shape the defence budgets of countries. In the global defence economy, economic deterioration as a result of the coronavirus pandemic, rising inflation, increases in commodity prices, and the war in Ukraine have been the main developments which directed military expenditures in recent years. In particular, the high inflation environment in the global economy has turned the real growth of defence expenditures into negative for many regions around the world. Among the seven regions, namely North America, Europe, Russia and Eurasia, Asia, the Middle East and North Africa, Latin America and the Caribbean, where the global defence economy was examined in 2021 and 2022, only two regions, namely Europe and Asia, had real defence expenditure growth.

The growth in the Turkish defence and aerospace industry has been affected by the real contraction in the global defence economy as a result of the pandemic and rising inflation in the global economy in recent years. The position of the Turkish defence industry in the global arena, however, kept rising compared to competitor countries despite the above-mentioned contraction. This outcome is essentially a result of the dynamism of the longterm growth trend in the Turkish defence industry. Examination of the long-standing growth trend in the Turkish defence industry is very important in terms of better understanding the global position of the Turkish defence industry in 2023 and in the upcoming years. The examination of Table 1 shows that Türkiye ranks 18th in militar  expenditures in 2021, parallel to the global economic size ranking. In addition, Türkiye ranks 11th among the countries exporting arms in 2021. This has been achieved as a result of the fact that Türkiye’s share in global arms exports has increased approximately 8 times to 1% in 15 years, while only 0.13% of the share was taken in the global arms exports in 2007. Such success has been made possible by the rise of Turkish defence industry companies in the global rankings. Despite the fact that only ASELSAN from our country was among the top 100 global defence companies in 2007, three of our defence companies succeeded in being ranked in the top 100 in 2021. As seen in Table 2, as a result of this success we had in 2021, the Turkish defence industry ranked in the same as countries such as Germany, South Korea, and Israel.

The inclusion of three Turkish companies among the 178 defence companies in the Turkish Defence Industry Product Catalogue published by the Presidency of Defence Industries demonstrates that the Turkish defence industry is capable of creating its own champions and branding. Considering the importance of branding in terms of global competition, this success is of great importance. The rising position of Turkish defence industry companies and the Turkish defence industry around the world becomes even more significant when the growth in defence and aerospace industry statistics is taken into account. The examination of Table 3 shows that the defence and aerospace industry turnover, which was USD 1.06 billion in 2002, reached approximately USD 10.16 in 2021, which is extremely important in terms of the contribution of the defence industry to the economic growth in Türkiye.

In addition, the R&D expenditures and employment numbers in the defence and aerospace industry statistics of recent years shown in Table 4 clearly demonstrate that the defence industry creates a significant employment opportunity and is a remarkable R&D-intensive sector.

In conclusion, the Turkish defence industry, whose position in the global defence economy is in a rapidly increasing trend, plays a strategic role in Türkiye’s economic development through high value-added production, training of talented workforce, and its contribution to technical development activities.